Heard Off the Street: Where are energy firms buying their steel?

When it comes to purchasing steel tubes, the buying habits of domestic energy producers have caused a world of hurt for U.S. steel producers, who expected America’s drive to energy independence would mean more jobs for American workers. Instead, it’s meant a tidal wave of dumped, subsidized imports of steel pipe. 

The fact that U.S. energy companies are purchasing roughly equal amounts of American-made and imported steel tubing will, in a matter of days, force U.S. Steel to shut down indefinitely a McKeesport plant and another in Belleville, Texas, putting about 260 people out of work.

“We will continue to fight unfair trade by foreign competitors who are creating a detrimental impact and threat to middle-class paying manufacturing jobs,” U.S. Steel President and CEO Mario Longhi said when he announced the closings in June.

If only there were a way to identify where domestic energy companies bought their steel, perhaps more of them could be exposed for relegating American steel workers to the unemployment line.

Or so Pennsylvania law givers postured a few years ago when they began requiring companies that operate wells and pipelines in the state to disclose where the steel they use was made. The Public Utility Commission collects the data from pipeline operators while well operators report to the Department of Environmental Protection.

It was supposed to be a straightforward bureaucratic exercise that would enable those so inclined to identify energy companies that are putting Americans out of work.

Put aside for the moment the fact that reporting and monitoring of the disclosures is lackadaisical and that the data is gathering dust rather than influencing corporate purchasing habits. There’s a more fundamental problem: Pennsylvania’s energy producers are claiming publicly to be strong supporters of the American steel industry, but the DEP says their red, white and blue boasts do not square with the data the companies are reporting to the agency.

According to the DEP, since the disclosure requirement went into effect two years ago, 77 percent of the unconventional wells drilled in the state were built strictly with foreign steel. Another 11 percent used a mix of domestic and imported steel. Only 12 percent of the wells were all American, the DEP said.

The DEP did not take on the monumental task of looking at data for all 3,669 wells drilled since the disclosure requirement went into effect. That would have required wading through thousands of pages of paper records scattered among the agency’s regional offices. Instead, the DEP looked at 348 wells, a review that lasted five weeks. It concluded the sample size was large enough to provide 95 percent statistical accuracy to its results.

DEP spokeswoman Morgan Wagner said the Post-Gazette’s inquiry was “the first time this information has been requested.”

The DEP’s findings vary considerably from what the PUC found: Pipeline operators reported using about 90 percent domestic steel.

Nationwide, imports of so-called oil country tubular goods — the type of steel pipe that goes into wells — have captured about half of the U.S. market, according to the American Iron and Steel Institute. When considering all types of steel, imports have captured 27 percent of the U.S. market, the industry group said.

The DEP’s findings shocked energy producers, who cannot fathom how the agency could come up with such a number.

“Based on a brief, high-level survey, more than 90 percent of the well casing and tubular steel used by Marcellus Shale Coalition companies is U.S. manufactured,” a spokesman for the industry group said. 

Range Resources spokesman Matt Pitzarella said the company’s Marcellus region wells “are constructed with domestic steel from U.S. Steel Corp.”

“Our total Marcellus wells are 98 percent domestic steel. ... We remain fully committed to U.S. Steel, who is a highly valued partner for Range,” he said.

U.S. Steel declined comment. So did TMK-Ipsco, the U.S.-based arm of Russian tube producer OAO TMK. TMK-Ipsco, which has operations in Koppel and Ambridge, and U.S. Steel are among the U.S. steel producers that filed a complaint last year over steel pipe imports from nine countries. The U.S. International Trade Commission is supposed to make a final ruling in the case later this month.

While the drillers are at a loss to explain the discrepancy, Ms. Wagner of the DEP has some ideas.

“If operators dispute our record findings, information supporting their claims is not being reported to the department on well records,” the DEP spokeswoman said in an email.

No matter where the truth lies, the pain imports are causing U.S. workers is real. It won’t be alleviated by headline-happy lawmakers whose halfhearted efforts to document import buying end in steel workers being given the unenviable task of deciding whether Big Energy or Big Government is telling the truth.

Len Boselovic: 412-263-1941 or lboselovic@post-gazette.com

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